FOREX Fundamental analysis for EUR/USD on October 18, 2024
Economies behave unpredictably, like wild animals that cannot be controlled, even when central banks are trying to stabilize them. In 2021, the Fed claimed that inflation growth would be temporary, but the PCE level remained above 3% until November 2023. Last March, when the US banking crisis broke out, many predicted a recession, but the economy unexpectedly grew by 3%. At the same time, the European economy, which showed positive results in the first half of the year, found itself in a more difficult situation in the second half. This forced the ECB to step up monetary policy easing measures, which led to a decrease in the EURUSD rate to the level of 1.08.
ECB President Christine Lagarde tried to inspire optimism, stating the prospects for a "soft landing" of the economy. However, this caused alarm among investors, who considered that the reduction in the deposit rate by 25 basis points to 3.25% was undertaken solely to avoid panic. A more significant decline could be seen as a sign of concern about an impending recession or deflation in the region. But even such a small decrease was enough for the EURUSD rate to decrease even more.
The ECB unanimously decided to leave the door open for further monetary easing, which led to an increase in expectations of a rate cut by another 50 basis points in December. Now investors are predicting acts of monetary expansion at each subsequent ECB meeting, including April. Previously, it was assumed that this process would be completed in March. The ECB's rhetoric seemed softer than expected.
Now futures markets expect the same amount of stimulus from the Fed and the ECB – about 140 basis points by the end of the current cycle. However, against the background of more confident growth of the US economy (about 3%) compared to the Eurozone, which is showing modest growth of 0.2% and faces a risk of falling, this looks illogical.
The European Central Bank needs more decisive action, while the Fed can afford to act more cautiously due to an acceleration in retail sales (by 0.4% in September) and a decrease in the number of applications for unemployment benefits. These indicators confirm the stability of the US economy.
The forex trading strategy "buy and hold" is still relevant, only now, in relation to EUR /USD, it is called "sell and hold". Successful entries into short positions above 1.12 and 1.1045 confirm the correctness of this approach. It is only important to build up positions on trend corrections in time, which may occur when major players start taking profits. Any market movement needs rollbacks.
EUR/USD Technical analysis
Yesterday, EUR/USD broke through the "Golden Zone" of 1.0878 - 1.0869. The next target of sellers is the Target zone 1.0794 - 1.0777. We will consider new sales to complete an upward correction from the resistance areas 1.0916 - 1.0907 and 1.0969 - 1.0955. The main target of the bears will be the minimum of yesterday.
To change the direction of the trend to an upward one and switch to purchases, the pair should break through the level of 1.0969 and consolidate higher.
USD/CAD analysis for October 18, 2024On Friday, USD/CAD shows mixed movements, consolidating around the 1.3800 mark, without moving much away from the local highs on October 15. The volatility of currency pairs in the market remains low by the end of the week, as there is little significant macroeconomic data. Investors are analyzing already published statistics and preparing for the upcoming US presidential elections in early November.This week, data on retail sales in the United States were released. In September, they increased by 0.4% (against 0.1% in August), which exceeded analysts' forecasts of 0.3%. Industrial production, on the contrary, decreased by 0.3% after rising by 0.3% a month earlier, which is slightly worse than expected. The index of business activity in the manufacturing sector of the Federal Reserve Bank of Philadelphia in October increased from 1.7 to 10.3 points, and the number of applications for unemployment benefits fell sharply — from 260 thousand to 241 thousand in the week of October 11.In Canada, inflation statistics were published this week, which may affect future decisions of the Bank of Canada. The core consumer price index in September showed zero dynamics in monthly terms after a decrease of 0.1% in August, and in annual terms it increased from 1.5% to 1.6%. However, the overall inflation rate fell to 1.6% year-on-year, which was lower than preliminary estimates.A steady upward trend is visible on the chart of days. The Bollinger bands remain wide despite a slight narrowing, which indicates the possibility of further activity. The MACD indicator supports a weak buy signal, and the Stochastic indicates a downward trend, ignoring corrective movements.In case of a confident breakdown up to the 1.3800 level, we will open long positions with a target of 1.3900 and a stop loss at 1.3750.If the pair bounces off this level and breaks down to 1.3765, then we get a sales signal with a target of 1.3700. We will set the stop loss at 1.3800. 
AUD/USD ends the week with unstable dynamics, trading near the key level of 0.6700. The Australian dollar is trying to continue its upward movement, which began with a rebound from the lows on September 12 after the publication of positive economic data.In September, Australia recorded an increase in the number of employed by 64.1 thousand people, which significantly exceeded the expectations of analysts who predicted 25 thousand. Full—time employment increased by 51.6 thousand, and part-time employment by 12.5 thousand. The unemployment rate remained at 4.1%, while a slight increase to 4.2% was expected. The labor force participation rate increased from 67.1% to 67.2%.Positive statistics from China also support the Australian dollar. In September, industrial production in China increased to 5.4% against the projected 4.6%, and retail sales increased to 3.2%, exceeding expectations of 2.5%. China's GDP for the third quarter grew by 0.9% compared to the previous quarter and by 4.6% year-on-year, which is in line with experts' forecasts.Today, the market's attention will be focused on data on the US housing market, which may affect the further dynamics of the pair. Analysts expect a slight decrease in the number of construction permits issued from 1.47 million to 1.46 million, and construction may decrease to 1.35 million.Technical analysis on the daily AUD/USD chart gives a contradictory picture. The Bollinger band indicator indicates the possibility of corrective growth in the near future, despite the current downtrend. The MACD retains a sell signal, although it is trying to turn up. Stochastic signals a possible oversold pair, which indicates the likelihood of a short-term upward reversal.It is recommended to open long positions after the 0.6732 level is broken up. The target is 0.6800. We set the stop loss at 0.6700.An alternative scenario is that when the 0.6675 level breaks down, we open sales with a target of 0.6622. We will put the stop loss at 0.6700. 
On Thursday, USD/JPY shows multidirectional dynamics, consolidating near the level of 149.50, close to the highs of early August. Investors prefer to refrain from active actions in anticipation of the publication of US retail sales data for September. Sales are projected to accelerate to 0.3% (from 0.1%), and excluding cars, they will remain at 0.1%. Data on the production activity of the Philadelphia Federal Reserve is also expected, where analysts predict an increase in the index from 1.7 to 3.0 points. Earlier, the index of production activity of the Federal Reserve Bank of New York fell sharply from 11.5 to -11.9 points, which turned out to be significantly lower than forecasts.Today, data on industrial production in the United States will also be released, where a decrease of 0.2% is forecast after an increase of 0.8% in the previous month.The published data from Japan put additional pressure on the yen. In September, exports fell by 1.7% after an increase of 5.5% in August, while imports fell to 2.1%, missing expectations for growth to 3.2%. This led to a reduction in Japan's trade deficit from 703.2 to 294.3 billion yen. Additionally, the index of activity in the service sector decreased by 1.1%, while analysts expected a fall of only 0.2%.Technical indicators on the daily chart indicate uncertainty. The Bollinger Band indicator indicates a possible narrowing of the range, which reflects the short-term mixed dynamics. The MACD is trying to turn downwards, forming a sell signal. Stochastic also indicates a possible continuation of the downtrend in the near term.It is recommended to open short positions when the price is fixed below the level of 149.12 with a target of 147.00. We will set the stop loss at the level of 150.00.If the pair breaks above the 150.00 level, we will receive a buy signal with a target of 151.50 and a stop loss at 149.12. 
FOREX Fundamental analysis for EUR/USD on October 17, 2024The economic problems of the Eurozone continue to intensify. But, trouble does not come alone. Adding to the expectations of a rate cut by the European Central Bank are the risks of a revival of Trump's trade policy and an unexpected drop in UK inflation below the 2% target. This led to a drop in British bond yields, which pulled down German yields. As a result, the EUR/USD pair has almost reached the sellers' target level at 1.085.Theoretically, a rate cut by the US Federal Reserve should weaken the dollar. However, in practice, everything depends on how fast and synchronously monetary expansion takes place in other central banks. Given the weakening Eurozone economy and the possible return of the region to deflation, the ECB is likely to accelerate the pace of monetary policy easing. Especially considering that inflation is slowing down not only in individual countries, but throughout Europe.Bloomberg experts expect that on October 17, the ECB will reduce the deposit rate by 25 basis points, and predict that by the end of 2025 the rate may fall to 2%.In contrast, the U.S. economy remains relatively stable. According to forecasts by the Wall Street Journal, by the end of 2024, unemployment in the United States will rise slightly – from the current 4.1% to 4.2%, and next year the average monthly job growth will be about 130 thousand. This allows the Fed to take its time with aggressive rate cuts. The federal funds rate is expected to drop to 4.4% by the end of 2024 and to 3.5% by the end of 2025, and then it may start to rise.If Donald Trump returns to power, protectionist policies and fiscal incentives could accelerate inflation, forcing the Fed to hold down rates first and then possibly raise them again. This is favorable for the dollar, and Deutsche Bank analysts recommend buying the dollar against the euro, the Mexican peso and the South Korean won. If Kamala Harris wins, on the contrary, the dollar may weaken against the Japanese yen.Today is the day of forex trading on the news. Thursday's main event for EUR/USD will be the meeting of the European Central Bank and Christine Lagarde's press conference. If the ECB reduces the deposit rate by 25 basis points to 3.25%, investors will most likely not be surprised, since such a maneuver has already been taken into account in current quotes. Without further signals of policy easing from Christine Lagarde, the news may cause EUR/USD to rise to 1.0905 and 1.0955. If the ECB decides to cut the rate by 50 basis points, the pair is likely to fall below $1.08. In the first case, it is worth considering short—term purchases, and in the second case, strengthen short positions.EUR/USD Technical analysisEUR/USD continues to trade in a short-term downtrend. In the decline, the pair broke through the "golden zone" of 1.0878 - 1.0869. The next target of sellers is the Target zone 2 1.0794 - 1.0777. We will consider new sales at the end of the upward correction in the area of strong resistance levels, which are the following areas: resistance (A) 1.0956 - 1.0947 and (B) 1.1009 - 1.0995.The first sales target from the resistance (A) will be the 1.0904 level. The second target will be today's minimum. 
GBP/USD continues to decline and is approaching the level of 1.3020. Investors are focused on fresh data from the UK, of which there were quite a lot this week. Inflation slowed significantly in September: the annual consumer price index fell from 2.2% to 1.7%, which is lower than the projected 1.9%. The monthly figure also dropped to 0.0%, although 0.1% was expected. Core inflation decreased from 3.6% to 3.2%, with a forecast of 3.4%.Investors continue to analyze the report on the UK labor market, published earlier. The number of applications for unemployment benefits increased from 23.7 thousand to 27.9 thousand, which exceeded forecasts of 20.2 thousand. However, the employment rate in August increased significantly from 265,000 to 373,000, and unemployment fell from 4.1% to 4.0%. At the same time, the average wage growth, including bonuses, decreased to 3.8%, and without them — to 4.9%.The US currency experienced some pressure after weak data on activity in the manufacturing sector in New York. The index fell from 11.5 to -11.9 points, which turned out to be much worse than expected. Data on retail sales and industrial production in the United States are scheduled for tomorrow, which may show growth.On the GBP/USD Daily chart, the indicators do not give a clear signal. The Bollinger band indicator indicates a narrow range and mixed dynamics. The MACD indicator gives a buy signal, and the Stochastic shows steady growth.Sales can be considered after a confident breakdown down the 1.3000 level with a target of 1.2900. We will move the stop loss to the level of 1.3050.In the case of a rebound from 1.3000 and an upward breakdown of the key resistance of 1.3050, we consider purchases with a target of 1.3150. We will set the stop loss at 1.3000. 
FOREX Fundamental analysis for EUR/USD on October 16, 2024Trump returns to the stage. Despite the positive data from Germany and the EU, the EUR/USD exchange rate continues to fall. Donald Trump, again leading in the polls, is actively promoting the idea of introducing new customs tariffs, which causes risks of renewed trade wars and pushes investors to protective assets, primarily the US dollar.Data on the Eurozone remains weak against the background of steady growth in the US economy. Despite the fact that the European economy showed relative stability in 2024, investors see that the region's problems are accumulating. The contrast in economic development between the United States and the Eurozone has led to a revision of interest rate expectations. The US Federal Reserve (FRS) is likely to cut rates more slowly than expected, while the European Central Bank (ECB), on the contrary, may accelerate monetary expansion. This dynamic strengthens the dollar's position in forex currency tradingThe situation is also complicated by potential innovations that Trump may introduce as president of the United States. Markets suggest that such measures may lead to higher inflation and a slowdown in the Fed's rate cuts, which will only strengthen the dollar among other forex currency indices. The increase in Trump's popularity attracts investors who turn to the greenback again, which further presses the euro.In addition, the news that Israel does not plan to attack Iran's oil infrastructure led to lower oil prices and reduced the risks of a new round of inflation, which also put pressure on EUR/USD. The pair's fall in recent weeks is also due to concerns about possible actions by the ECB at the October 17 meeting. The ECB is expected to cut the rate by 25 basis points to 3.25%, but the weakness of the Eurozone economy and the risks of recession may require more decisive steps.Nevertheless, there are "hawks" inside the ECB who can persuade the leadership to neutral rhetoric, which will support the euro. It is believed that if the ECB limits itself to only a modest rate cut, this may be a signal for short-term purchases of EUR/USD, especially if the exchange rate rises above the $1.0915 mark. However, investors should be on their guard, since the euro is still on a "bearish" trend, and one should not get carried away with long-term purchases.EUR/USD Technical analysisAs a result of the ongoing decline, EUR/USD reached the "golden zone" of 1.0878 - 1.0869. If the pair manages to break lower, then the next target of the bears in the format of a short-term downtrend will be the target zone 2 1.0794 - 1.0777. If the "golden zone" is held by buyers, then an upward correction may begin.In case of a corrective recovery, we are waiting for EUR/USD in the resistance area 1.0980 - 1.0971 or 1.1033 - 1.1019. After testing these zones, we will consider new sales of the instrument with the main goal in the area of today's minimum. 
On Tuesday, AUD/USD shows a smooth decline and tests the level of 0.6710 for a breakdown downwards. Yesterday, the instrument was also under pressure and reached new local lows since October 10, before the bulls temporarily regained some of the lost positions.The main pressure on the pair at the beginning of the week was exerted by economic data from China, which increased concerns about a slowdown in the Chinese economy. The volume of exports in September decreased from 8.7% to 2.4%, which was lower than the forecast of 6.0%. Imports also slowed from 0.5% to 0.3%, while analysts expected 0.9%. As a result, China's trade surplus decreased from $91.02 billion to $81.71 billion, which also turned out to be worse than forecasts.Earlier, China published inflation data for September. The consumer price index decreased from 0.6% to 0.4% year—on-year, and from 0.4% to 0.0% on a monthly basis. The producer price index fell by 2.8% year-on-year after a previous decline of 1.8%. These data reinforce concerns about the stagnation of China's economy, despite government stimulus measures that have so far produced only limited results.On Thursday, Australia will publish labor market data for September: employment growth is expected to slow from 47.5 thousand to 25.0 thousand, while the unemployment rate is projected to remain at 4.2%. On the same day, statistics on applications for unemployment benefits, retail sales and industrial production will be released in the United States. Retail sales are expected to grow from 0.1% to 0.3%, while industrial production will decline by 0.1% after an increase of 0.8%.On the daily chart, the Bollinger band indicator shows a steady decline. The MACD indicator continues to give a sell signal. Stochastic, on the contrary, shows an upward trendShort positions can be considered after a confident breakdown down the 0.6700 level with a target of 0.6622. We will set the stop loss at 0.6732.If the price bounces off the 0.6700 level and breaks through the 0.6732 mark, we will get a buy signal with a target of 0.6800 and a stop loss at 0.6700. 
FOREX Fundamental analysis for EUR/USD on October 15, 2024If the Federal Reserve surprised financial markets by lowering the federal funds rate by 50 basis points, then why shouldn't the European Central Bank (ECB) follow suit? Before the Fed meeting in September, few expected such a drastic step, and now many analysts consider the reduction of the ECB deposit rate from 3.5% to 3.25% to be a practically solved issue. However, rumors that the ECB may make an even more significant reduction caused the EUR/USD exchange rate to fall below the 1.09 level.In the decade leading up to the pandemic, which is often called "lost" for Europe, the ECB made tremendous efforts to deal with deflation. For 93 of the 120 months to July 2021, inflation remained below the 2% target. The ECB was forced to introduce unconventional measures such as quantitative easing programs and negative interest rates.The COVID-19 pandemic, despite all its negative consequences, has given the ECB the opportunity to rectify the situation. Gaps in supply chains led to an increase in inflation above 10%, which allowed the Central Bank to raise loan rates to 4%. The ECB has already lowered rates twice in 2024, but the accelerating return to deflation indicates that these steps may not be enough.The economic weakness of the Eurozone is obvious, and the situation could worsen if Donald Trump becomes president of the United States again. His trade wars will hit the export-oriented economies of the Euroblock, and his intention to stop supporting Ukraine will lead to the fact that Europe will have to finance assistance to Kiev from its own resources.Europe must avoid a return to deflation, and accelerating monetary easing, including a 50 basis point reduction in deposit rates, may be the solution expected on October 17th.At the same time, the Fed intends to act more cautiously. As Christopher Waller said, after decisive measures in September, the Central Bank should lower rates more slowly. If inflation falls below the 2% target and the labor market weakens, easing may accelerate. But if demand or unexpected economic factors turn out to be stronger, the Fed may suspend expansion.Rumors of a possible pause in the federal funds rate cut had the same effect on the markets as the discussion of the ECB rate cut by half a percent in October. The EUR/USD pair continues to develop downward dynamics, and the bulls do not yet see an opportunity for a counteroffensive. Until the ECB's decision, the euro is likely to remain under pressure.In the current situation, it is recommended to keep short positions open above 1.12 and from 1.1045, as well as strengthen them on upward pullbacks.EUR/USD Technical analysisEUR/USD continues to decline within the framework of a short-term downtrend. The main target of sellers is the "golden zone" 1.0878 - 1.0869. After working out this area, an upward correction may develop. If the correction starts from current prices, then it will be possible to wait for the pair in the resistance areas 1.0993 - 1.0984 or 1.1046 - 1.1032. After reaching these zones, we will consider new sales with a target at yesterday's low of 1.0889.